Entrepreneurship — And after? A study of growth willingness in small firms

Abstract

In this article an attempt is made to identify and estimate the relative impact of some factors that enhance and reduce the willingness of small business managers to pursue growth. This is done using interview data from a random sample of more than 400 Swedish small business owner-managers. The firms studied are quite small, having 2–20 employees, and represent four different industries, one of them being high-tech. The focus of the study is the following: 1) Can differences in growth willingness be explained by differences in the expected outcomes of growth? If so, what expected outcomes are important growth motivators and/or growth deterrents? 2) Do differences in achievement motivation affect growth willingness? 3) How does growth willingness and its determinants differ among firms in different size classes? According to the results, significant relations exist between expected outcomes and growth willingness. Among the factors investigated, expectations of financial reward and increased independence (the prospect of reducing external dependencies) are the most important motivators. However, economic incentives toward growth appear not to be at work for 40% of the sample. Fear of reduced employee well-being and loss of supervisory control appear to be the most important growth deterrents. An interesting result is that the relations between some expected outcomes and growth willingness appear to be asymmetric. When growth is expected to result in a loss of control, this has a strong growth-deterring effect, according to these data. If, on the other hand, a gain in controllability is expected, this has no motivating effect at all. For independence, exactly the opposite pattern is found. The results also suggest a positive relation between achievement motivation and growth willingness. This relation appears to be contingent on an expectation of financial gains from growth. Thus, in the absence of financial reward, achievement motivation does not enhance growth willingness. As for differences in motivational patterns for managers of firms in different size classes, the results indicate that for a large share of the population of small business managers, the deterring forces override the motivating incentives once their firms have reached a size of about 5–9 employees. Thus, the psychological reasons for further growth seem weak. Only a minority of small firm managers, to whom growth is intrinsically motivating, are likely to pursue continued growth of their firms.